SYDNEY, Oct 10 (Reuters) – Australian coal output is hitting record highs and producers are pressing on with plans to open new mines, defying prices at five-year lows, environmental opposition and trade restrictions imposed by some of the country’s most important foreign buyers.
China, the world’s top coal importer, on Thursday announced it would impose import tariffs to help ailing domestic miners who have been hit by rising costs and plunging prices.
Glencore Plc, one of Australia’s biggest miners, estimates up to a third of Australia’s coal sector is running at a loss, yet collieries are flooding countries such as China and Japan with million of tonnes of coking coal used to make steel and thermal coal to generate power.
In many cases miners are finding it cheaper to run in the red than shut owing to so-called “take or pay” contracts that require payment of haulage fees whether or not any coal is shipped.
The fees were last set in 2009, when coal prices were much higher and still providing healthy profit margins. “Now it simply costs more to mine and ship the coal than we can sell it for,” said an executive at a mid-sized coal company who did not want to be named because of the sensitive nature of his company’s running costs.
Many companies were facing a balancing act on whether to absorb the sizeable upfront costs of closing a mine or keep running in the hope that coal prices will pick up, said Matt Trivett, a commodities analysts for Patersons Securities.
“Australia has definitely been one of the slowest countries to react to the decline in prices and it is arguable it hasn’t really reacted at all,” Trivett said.
OUTPUT RISING
Miners are not only keeping existing mines open, but pushing ahead with plans for new ones – counting on low-cost projects that will outlast the downturn.
Later this month, BHP Billiton and joint venture partner Mitsubishi Corp will open the massive Caval Ridge colliery, yielding 5.5 million tonnes of coking coal a year for at least 30 years.
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